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Zheng Yongnian: decentralization invigorates growth; unilateral opening a pathway to geopolitical equilibrium
Professor of the Chinese University of Hong Kong (Shenzhen) illustrates how local autonomy sparks growth, and why China's economic cooperation with ASEAN stands crucial to geopolitical stability.
Zheng Yongnian is a Chinese political scientist and Professor of the Chinese University of Hong Kong (Shenzhen) and a prominent commentator of current affairs within China. He was Director of the East Asian Institute at National University of Singapore and before that founding Research Director of the China Policy Institute, the University of Nottingham.
Prof. Zheng highlights the vital role of decentralization policies in China's growth trajectory in contrast with the Soviet Union. While both countries adopted planned economies, China allowed local governments greater control over means of production, i.e. public property, contributing to its remarkable economic growth. The Soviet Union, on the other hand, rarely empowered its republics with real authority.
In the context of growing China-U.S. tensions, Prof. Zheng suggests China employ unilateral border opening to enhance its regional influence and dissuade ASEAN countries from siding with the U.S. He emphasizes the importance of avoiding military competition with the U.S. and, instead, harnessing China's economic strengths to stimulate healthy economic competition between the two countries in ASEAN, ultimately promoting peace and prosperity in the region.
Prof. Zheng further clarifies the concept of unilateral opening, emphasizing a shift away low-end merchandise dumping to prioritizing on division of labor, extending industrial chains into ASEAN, and creating local jobs and tax revenue. The success of the China-Laos collaboration could serve as a model for similar partnerships with neighboring countries.
Yesterday, I took a ride on the Lao–China Railway (LCR) from Kunming, China to Mohan, Laos, exploring China's opening-up in border areas like the China-Laos Mohan-Boten Economic Cooperation Zone. For me, the trip provoked many thoughts on China's policies on border opening in the new era and relationships with its neighbors, which I would like to share on this occasion.
China’s Changing Decentralization Strategy
First, I’d like to discuss an academic perspective on economic decentralization, as it is closely related to border opening.
China's efforts to open its borders is not new; they've actually been in place for a long time. It constituted my first English article after arriving in the U.S. in the early 1990s. The concept of “border opening” was introduced in the mid-1980s by Hu Yaobang, the then General Secretary of the Communist Party of China (CPC), who gave many significant directives on the policy. His successors have all followed his footstep in emphasizing this strategy. In recent years, border opening has also become ingrained in the Belt and Road Initiative (BRI).
In the early 1990s, both Chinese and Western scholars were debating why China's reforms succeeded while the Soviet Union and Eastern European countries suffered and struggled for lack of similar reforms. A mainstream perspective attributed China's success to its strategic decentralization, i.e. a transformative shift in its central-local dynamics.
Analyzing China's reforms through the lens of central-local relations was an intriguing subject for scholars over a long period of time. This was also the focal point of my Ph.D. research, with a segment discussing Yunnan. I examined the economic coordination symposiums across “five provinces and seven parties”, namely Sichuan, Yunnan, Guizhou, Guangxi, and Tibet, plus Chengdu and Chongqing (hence the “seven parties”). Starting in 1984, these provinces, cities, and autonomous regions in southwest China decided to overcome administrative boundaries, unite economically, and leverage their collective strengths to accelerate economic growth in the region. Their solution, after research and discussion, was to establish a “five provinces and seven parties” economic coordination symposium that facilitates regional integration.
This coordination symposium, as far as I know, was also related to the Pan-Pearl River Delta cooperation that emerged afterwards. The Pan-Pearl River Delta Regional Cooperation entails an even larger area than the “five provinces and seven parties” — Fujian, Jiangxi, Hunan, Guangdong, Guangxi, Hainan, Sichuan, Guizhou, Yunnan (hereafter called “nine mainland provinces”), plus Hong Kong and Macau Autonomous Region. I remember one of the focal points of “five provinces and seven parties” symposium was to find a sea outlet for inland Sichuan. Many believed that the Beibu Gulf in south China’s Guangxi could serve the purpose. Overall, the provinces and regions within the “five provinces and seven parties” were relatively less affluent, and they hoped to garner more support from the central government and achieve faster development through conglomeration.
The emergence of “five provinces and seven parties” symposium underscored a crucial topic in China’s economic reforms: regional economic integration and border opening. This ethos is alive even today, with places like the China-Laos Mohan-Boten Economic Cooperation Zone.
Diverging Ends of China and Soviet Union's Planned Economy: A Property Rights Perspective
Moving on, I delved deeper into the puzzle of the Soviet Union's collapse and China's economic acceleration post-1990s. I began to compare the two different economic models by analyzing the central-local dynamics. My finding was the Soviet Union was also steeped in Western cultural influence, which was manifested in oscillation between extremes. Such Western extremism is especially evident in its approach to property rights.
In the West, property rights are seen by two factions in distinctly different ways: Western European countries and the United Staes, believe in the sanctity of private property sacrosanct—a faith, until today, still deeply embedded in the Western psyche; and the other extreme, epitomized by the Soviet Union, hold public assets as inviolable. One of my mentors at Princeton suggested I explore the differences between Chinese and Soviet planned economies from a property rights perspective. What I found out was, although both nations embraced planned economy, local governments in China had control over most means of production, whereas the central government of the Soviet Union dominated in this area. Although the Soviet Union professed a federal structure, real power rarely percolated down to its republics. China, in contrast, allowed public property to be shared and divided among different levels of government.
Historically speaking, the Chinese civilization doesn't hold such extreme views on property rights as seen in the West. There were historical occurrences of both public and private ownership in the Chinese history, and cases where the two coexisted. The well-field system (井田制度) in the Spring and Autumn Period, for example, was an arrangement that tried to merge both systems. [In the well-field system, a square area of land was divided into nine identically sized sections. Although all land was owned by the state, or king, the eight outer sections were privately cultivated, and the harvest went to eight respective farmer families. The center section was communally cultivated, and the harvest belonged to the king or the landowning aristocrat.]
An illustration of the well-field system
I've proposed this academic perspective primarily to highlight the vital role of decentralization policies in our nation's growth trajectory. Today, if we want to enhance border opening implementation and narratives, decentralization and property rights distribution are pivotal. Without a certain degree of decentralization and some property rights (even if it's just rights of use), and without some autonomy in decision-making, local governments will likely face great difficulties in promoting border opening. The relationship between top-level design and local execution, as well as between central and local authorities, must be properly defined.
Importance of Border Opening: ASEAN is Key in Sino-US Competition
The second point I'd like to discuss is the importance of border opening from a national strategic perspective. Yesterday, we visited the Mohan-Boten Economic Cooperation Zone. From there, we were looking straight at Laos, a member state of ASEAN. ASEAN's current positioning is critically significant for China's global strategy, with the U.S. and China vying to bond with ASEAN. Essentially, ASEAN has become a primary focus for influence between China and the U.S.
If we take a look at the countries surrounding China, Central Asia is important — despite the presence of the Shanghai Cooperation Organization (SCO), the primary concern in Central Asia remains national security, as these nations don't have large economies. Looking further east, we see the Korean Peninsula and Japan, that is, Northeast Asia. Yet today, both Japan and South Korea seem to be gravitating further from autonomy and closer to the U.S., evolving from bilateral to trilateral alliances. This leaves us with ASEAN. The U.S. is exerting significant pressure on ASEAN, hoping that the bloc tilts towards their side.
Beyond the China-U.S. dynamics, ASEAN has its own set of considerations. Some ASEAN countries have formal alliance agreements with the U.S., such as the Philippines and Thailand. In recent years, the U.S. has also been actively courting Vietnam. Although Vietnam hasn't formally declared itself an ally, it's become something akin to one.
Following various disputes in South China Sea, where does ASEAN stand regarding China? ASEAN traditionally operates on a consensus-based decision-making process: once ten countries agreed, the decision was a go. In recent years, some ASEAN countries, like Vietnam and the Philippines, have internally advocated for a voting system, where the majority rules. Should this type of decision-making system be established, ASEAN would be as good as siding with the U.S. However, in light of the Russian-Ukrainian war last year, ASEAN has, for now, adopted a stance of collective neutrality, neither tilting towards the U.S. nor China, avoiding a simplistic "choose-a-side" approach.
But how long can ASEAN maintain its autonomy? This remains uncertain. If ASEAN can remain independent, it would be highly beneficial for China. China and ASEAN countries do not share U.S.-like alliances. If a conflict arises between China and the U.S., most countries would likely side with the US since their security is part of the U.S. security framework. Currently, with U.S. strategically shifting to the Asia-Pacific region, its Cold War advocates have continued to destabilize East Asia. Throughout the region, the China-U.S. confrontation is evident, yet few mechanisms are in place to ensure peace.
This is where projects like the LCR and the economic development zones between China and Laos become profoundly significant. China must adhere to one principle in China-ASEAN interactions, the principle of avoiding military competition with the U.S. Military competition with the U.S. must be replaced with economic competition with the U.S. If China-U.S. military race emerges in East Asia, then the entire South China Sea and the Western Pacific would become a powder keg, which neither China nor ASEAN wishes to see. Economic competition between China and the U.S. in ASEAN is inevitable but not intimidating, given China's economic strengths in the region.
Economic Cooperation with ASEAN: A Unilateral Opening Strategy
So, how can China expand economic cooperation with ASEAN? This is the third point I'd like to address. I believe we need to implement unilateral opening, further elevating the strategic position of the Mohan-Boten Economic Cooperation and aligning it with ASEAN economic integration.
To be honest, ASEAN remains cautious in several areas about cooperating with China. Geopolitically, China is surrounded by smaller nations and is the major power. If China's rise makes these nations feel threatened, they might invite the distant U.S. and the West it represents for counterbalance. Yet on the other hand, ASEAN is economically dependent on China, a dependence that deepens with China's growth. Some ASEAN countries may have spoken favorably of China over the years, but it's primarily out of economic self-interest. Some ASEAN nations invest more in China than in the U.S. If conflict breaks out between China and the U.S., these nations would face significant economic consequences for siding with the U.S. due to their alignment with the U.S. security system.
That is why China should be confident in its economic collaborations with ASEAN. China should implement unilateral opening in the Mohan-Boten Economic Cooperation Zone. Laos has a population of 7-8 million, roughly equivalent to Hong Kong; it's unnecessary for China, with its 1.4 billion population, or Yunnan which has tens of millions of people, to always negotiate on equal terms on every issue with Laos. China can initiate many policies without requiring reciprocal response from Laos. Laos, as a small country and a member of ASEAN, actually faces plenty of obstacles to opening up. Historically, Britain's unilateral opening was much more successful than the US's reciprocal approach.
During my travels, I have observed in some ASEAN countries a certain degree of resentment towards China. Where do these sentiments come from? One economic reason is competition with China in low-end commodities. Chinese businesspeople came to these countries, set up restaurants and stalls, and flooded consumer goods markets with Chinese products. They had crowded out the livelihoods of local merchants, which was unwise and needs changes. China, being more industrialized and technologically advanced than nine out of the ten ASEAN countries (except for Singapore), should not compete for resources through such petty ways — like dumping low-end merchandise and crowding out local jobs. Such border opening will naturally breed resentment, with neither jobs nor tax revenue generated for the benefit of the local people. Instead, China should consider the comparative strengths of itself and neighboring countries, and enforce effective border opening based on division of labor. China should focus more on extending parts of its industrial chains to ASEAN, building new factories that generate jobs for the local people and tax revenue for the local government — a win-win situation.
The U.S. is an excellent reference regarding border opening policy. Both the Canadian and Mexican economies concentrate near their borders with the U.S. Together, the three countries successfully transformed their borders from economic peripheries to economic centers. China shares borders with 14 countries; transforming these border regions into economic hubs can drastically change China's regional security and development. In this respect, the China-Laos Mohan-Boten Economic Cooperation Zone should serve as an exemplar.
Currently, Mohan, where the Mohan-Boten Economic Cooperation Zone is situated, is overseen by Kunming, capital city of Yunnan province in China. It is imperative to fully acknowledge the weaknesses of this enclave design, modeled after the Shenzhen-Shantou Special Cooperation Zone, in addition to its merits. Taking Shenzhen as an example, Shenzhen and Shantou have vastly different development levels, making one-size-fits-all policies ineffective. Their relationship is more of a "paired assistance" model. Underdeveloped areas often need more open-mindedness and more open policies as a prerequisite to growth, but it’s often the case that transplanting rules and regulations in developed areas might not promote their development but restrict it instead. What works for developed cities like Shenzhen or Kunming has been adapted to the regional realities and might not work for less-developed regions. Kunming's policies are not directly transferrable to Mohan; analyses must be carried out as to which policies are suitable and which aren't. That is to say, the Mohan-Boten Economic Cooperation Zone needs more liberal policies than Kunming.
The Mohan-Moding Economic Development Zone can draw inspiration from several domestic areas, including the Demonstration Zone of Yangtze River Delta Integration. In my recent studies, I discovered that Zhejiang, Jiangsu, and Shanghai — spanning two provinces and one city — have set up a council for this Integration Demonstration Zone. The council is further backed by an executive committee, both of which function as government-level coordinating bodies. Yet, simply having government coordination isn't enough for regional integration. Entrepreneurs and enterprises must take the lead to drive sustainable growth. So, these provinces and cities also formed a developer alliance led predominantly by entrepreneurs. Of course, these measures are still inadequate for regional economic integration. When you compare the Guangdong-Hong Kong-Macao Greater Bay Area to New York and San Francisco Bay Areas, it's evident that the latter regions have a diverse range of coordinating bodies, from government entities, enterprise networks, industry coordinators, to non-governmental organizations. And these coordinative bodies usually operate from the bottom up.
Another point of reference is the China–Singapore Suzhou Industrial Park in that both the Mohan-Boten and Suzhou Zones involve collaboration between two countries. People have underestimated the Park's influence, but it's pivotal — it was China's first major industrial park built in partnership with another country. Its successful model has since been replicated across China. The Mohan-Boten Zone could learn from the early days of cooperation between China and Singapore in the Suzhou park — a top-tier coordination mechanism between the two nations, with enterprises leading the coordination and cooperation efforts. Relying solely on government-led coordination is challenging, especially when issues of sovereignty and shares are involved. Business-to-business coordination, on the other hand, tends to be more flexible. Perhaps China and Laos can set up a council for coordination and allow enterprises and non-governmental institutions to spearhead growth.
In short, it's crucial to view the China-Laos economic partnership from a broad strategic vantage point. If proved fruitful, this partnership could pave the way for similar collaborations with countries like Myanmar and Vietnam. Laos currently has a robust relationship with China, and the China-Laos experience could lead to breakthroughs for China's cooperation with other neighboring countries. Yunnan, China, and the regions beyond can all stand to benefit from unilateral opening that allows concessions and is easy to replicate.
The East is Read has recently published his view on political parties and Chinese modernization:
Prof. Zheng is featured multiple times on Pekingnology:
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